The Study On The Correlation Between The Concentration Of The Audit Market And The Quality Of The Audit Services

With the United States against the "Big Four" monopolizing the audit market, firms in China are being proposed to enlarge and strengthen in order to enhance China's audit market concentration. why is there the difference? The firm's merger is one of the most effective way to solve the problem that Chinese firms are too small, while the merger could also lead to a monopoly, how to choose? Whether the ideas that we choose to develop our audit market are right or not? To solve these problems we must begin with the reality of our country. We must study the relationship between the concentration of audit market and the quality of the audit, in other words, whether the concentration will increase or decrease the quality of audit. The research on the issue is relatively small. In 2006, China Association of Certified Public Accountants proposed the overall objectives that the firms should become bigger and stronger and the new audit principle was applied. We are lack of the research base on the datum after the new audit principle and the objectives. I try to analyze the issue particularly on the new background and to make a valuable exploration about the research on the link between the concentration and the improvement of independent audit quality.This thesis analyzes the relationship between the concentration of audit market and the audit quality in the perspective of industrial economics, proposing the assumption that in a certain range the more concentrated the audit market, the better the audit quality. I collect the datum related from 2004 to 2008 and study the concentration of our audit market, the situation of the audit quality and the possible development, which I make comprehensive analysis and particular test on. Then I give some advice according to the results. The results show that China's audit market concentration and audit quality have the positive linear relationship. It indicates that the quality will change at the same direction with the variation of the concentration of the audit market. For a single firm, It also means that the bigger the market share ,the better the audit quality. Now our audit market concentration hasn't reach the critical point after which the audit quality will be decreased, so the high audit quality requires the high concentration of audit market. Definitely, increasing the market share of a single firm will be good to the improvement of the audit quality. The ideas proposing that the firms should be bigger and stronger are suitable for the circumstance in our country.